Q4 2019 Earnings Call
Ladies and gentlemen.
For today's call.
Right.
Sometimes.
We appreciate.
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[music].
Good morning.
I'll be your conference.
You're welcome everyone to the two harbors fourth quarter.
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This conference call.
Participants.
After the speaker's remarks.
Let's turn the corner.
With Investor Relations for.
Thank you and good morning, everyone. Thank you for joining our call to discuss two harbors fourth quarter 2019 financial results.
With me on the call. This morning, our time series I, President and CEO Mary risky our CFO.
Not cabinet they'll Greenberg our co CIO.
That's where we've been financial tables.
Associated with today's call were filed yesterday the Kathy.
A copy you may find them on our website on Pcs website.
Uh huh.
In our earnings release in flights, we've provided a reconciliation of GAAP to non-GAAP financial measures. We urge you to review this information in conjunction with today's call.
I would also like to mention that this call is being webcast you may be accessed from the Investor Relations section of our website.
I would like to remind you that remarks made by management during this conference call and the supporting slides.
Forward looking statements.
Forward looking statements are based on the current beliefs and expectations of management.
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Making materially different because it's a variety of risks and other factors.
We caution investors not rely on Julie on forward looking statements, except it may be required I lost you Harbor, that's not update forward looking statements and expressly disclaims any obligation to do so.
I'll now turn the call over to Tom.
Right.
We hope you had a chance to work fuel.
Okay.
Hi.
I just talked much like Hillary each works you all.
Sure.
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Your core properties were sold.
Oh Gosh conservation that's your partner focus.
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Accordingly.
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Good morning.
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Fortunately.
Oh, that's under one.
Our portfolio as well.
Actual controllers.
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Remains subject to the discussion.
Its workforce.
Please turn to slide four.
And the 10 years.
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We have got huge.
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Your company Golf course, Oh, sorry for.
Just any color on.
Oh words strategy.
Most importantly during this time Charlie.
Stockholder returns.
While 56%.
Oh, the change in stock price.
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We also grew our book so you like China, 0.4% during this timeframe.
Oh for these metrics are substantial part so hot water storage workers.
Apart.
Some quarter to remarket thought just how's the largest heartbreak mortgage riet.
Oh, sorry, she differentiating factors.
First coaching killing I'm sorry.
Yes, so we're watching a broadening of tools to average interest rate that's spread.
Sure.
Okay.
Portfolio legacy non agency securities.
Our strategy, what's possible portfolio construction.
Purity torture.
That's correct.
That's what Chuck.
Over the long term.
Our success over the past years.
Well not impossible.
Extremely talented Andrew.
Oh punch workers.
Only focused on Courtney engagement.
Oh, yes, the foundational work.
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With that I watch on the call to marry to review our financial results.
Thank you Tom.
Turning to slide five let's review our financial results for the fourth quarter.
Well generate a comprehensive income of 56.8 million for 21 cents per share.
For the year, we generate comprehensive income.
<unk> hundred 26.7 million.
Dollars, a nine cents per share representing an annualized return on average common equity of 21.7%.
Got you at December 31st $40.54 per share compared to $14.72 at September 30.
Moving to slide six let's discuss our core earnings results.
Core earnings, including dollar roll income was 25 cents per share in the fourth quarter.
Our earnings this quarter was favorably affected by lower like or increase servicing income as a result of MSR portfolio girls and higher T.D. dollar roll income.
This was offset by agency RMBS portfolio rotation from higher to lower coupon. That's lost continued higher RMBS amortization in a faster prepayments.
As a reminder, we calculate core earnings without removing the impact of higher prepayments from amortization on RMBS.
Certain interest rate.
Three tenants can increase.
Experience accelerated amortization on premium bonds.
Yes occurs.
Earnings can become decoupled from the underlying financial performance of the company.
Turning back to Tom's earlier cotton.
My current access not always a good proxy ongoing earnings power of our company.
Our far down again.
Let's turn to slide seven to review, our taxable income and dividend distributions in 2019.
This year the regenerate taxable income of 510.6 million after utilizing a 11.7 long hair care already operating losses.
Okay and then.
Instead of about 483.6 million retail partner distribution percentage, 94.7%.
The tax characterization of the dividends distributed by two harbors will be treated as 90.6% ordinary income 9.4% qualified income for our stock holders.
The 20.
70 million undistributed taxable income for approximately 10 cents per share will be carried into 2020 for future distribution.
All these metrics align with our financial projection of the tax planning efforts throughout 2019.
For additional information regarding the distribution center tax treatment.
Please reference the dividend information.
Any investor Relations section of our website.
Turning to slide eight I portfolio yield declined in the quarter, two or 3.54%.
Oh and he'll cover is driven primarily by purchases of law Copart agency, RMBS and a lower interest rate environment.
That's wireless.
Continued increased amortization due to higher prepayment speeds.
Our net yield increased to 1.19% from 1.16% due to lower cost of funds.
Let's review our financing profile as shown on slide nine.
Our average economic that's exactly which includes.
Yeah, hi that aren't TV, because I said of course.
That's consistent quarter over quarter at 7.2 times.
They're comfortable with her leverage.
I'd expect that could change materially from here.
Our diverse financing profile includes an exit traditional retail somewhere about that revolving credit facilities.
On a fast secure terminals.
At December 31st Yeah, 23, active agency repo Counterparties with a weighted average maturity of 74 days.
The continued to focus on Laddering I recall maturities minimize exposure to changes in spreads and right.
I'd like to make a brief comment on the retail markets.
We have started to see some normalization of renewal rates recently.
We expect begin to see a benefit from this and the first half of 2020.
That's our existing repurchase agreements come to maturity equity restrikes them.
With respect to the FHLB and modest and not use of our facility to the fact that we continue to be.
Well to access more attractive terms in the retail markets even in the current conditions.
However, we do have the ability to make greater use of that facility in the future.
As a reminder, our FHLB facility expires in 2021.
Across all of our MSR bilateral facilities.
562 point.
6 million outstanding what the total capacity at 750, now and as of December 31st.
We also have partnered million outstanding MSR terminals.
An additional 1 billion capacity available under variable funding out related to the securitization.
As a reminder, these facilities I don't know.
Multiyear in term.
And now far out affected by the volatility in overnight and short term repo market.
More information on our financing profile, we see appendix slide 27.
With that I will now turn the call over to fill in that our markets overview and portfolio.
Thanks Mary.
Good morning, Thanks, very much like that.
Fourth quarter in many ways saw reversal of 29 team performance trends as long as interest rates rose higher coupon of having has widened Oh pardon me as tightness.
Lets had shown on slide 10.
The changes in interest rates and then current coupons piece parts for the.
Core and for the year.
Short and interest rates largely unchanged in the core a longer term interest rates rose.
Notably current coupons. These parts tightness in the same thing yield curve most other factors mergers prepayment fierce.
Unfortunately, all the widening experienced earlier in the year.
Okay.
<unk> performance by coupon is showing the right hand chart illustrates the recovery for either three to have seen the core.
At the same time higher coupon MPS underperformed long farms and were essentially flat on a corner.
Large year to date performance are intact.
Well last quarter.
At the local.
Yes weren't multiyear wise.
The actual spread tightening experience this quarter.
But aren't using yet or someone else.
Well, we still find lower coupon MBS attractive they say they are much excitement sir.
And the funding side.
Markets continue to make headlines in the fourth core.
Well.
Rates remained elevated turned the corner.
Supermarket operations.
Phil.
Nearly stabilize the market.
This was on display on the finally, the year overnight repo rates below the such targets, which is highly unusual.
And of course corner, so far as Mary said, you have been encouraged by ongoing for Vincent.
How many wells.
Please turn to slide 11.
The mortgage credit portfolio continues to perform well in this lower rate environments.
Prepayment speeds and overlap or rates driving increased cash flow.
I've seen in the chart on the lower Ross.
<unk> growth is below that of the previous five years.
That's remain solid with the rocks, 4% off year over year expectations are for can change slope increasing home prices.
Additionally, the housing market are still showing strength.
Five existing single family homes as long as it's been in 15 years I've seen in the churn at a lower right.
Given the supplier to.
Well books out of existing homes from a month supply point of view, so on an absolute basis not that far off from the post crisis was observed in 2012.
Notwithstanding the foregoing spreads widened slightly this quarter or credit portfolio contributed negligibly to performance.
However, our outlook for the sector.
Very constructive.
Change I believe that we won't be rewarded from a holdings in the sector.
I'll now turn over and above.
Thank you Bill and good morning, everyone.
Moving to slide 12, let's review our portfolio and positioning.
Summer 31st I'll portfolio was comprised 41 billion of that risk assets, which included.
33.4 billion all that I saw in securities and 7.7 billion, though bond equivalent value of TDX decision.
From a capital allocation perspective.
78% of capital was allocated to a rate strategy and 22 cents accretive.
Which was roughly unchanged from the prior quarter.
While we.
Hi pockets of opportunity in legacy cut it.
Still believes the new credit sectors to be on attractive.
Subsequent continuing to expect our capital allocation overtime to ship slowly away from credit imports rate.
Our portfolio activity is summarized at the top of fraud.
During the fourth quarter, we broke.
Created approximately 7 billion of exposure out of higher coupons and into lower coupons, so that by the end of year.
Fire around 11 billion, a 3% coupon, including both calls from TPH.
Cloud exposure at the beginning of the year.
It's activity maintains prospective.
So.
Much lower mortgage spread risk since the current coupon the lines that are with our colleagues.
As a result in the fourth quarter as Threed tightening and higher coupons widened we were still able to generate a positive total return.
Activity in the MSR market showed signs of picking up in the core.
We acquired 11.1 billion, you pp bulk purchases and another 11.2 going and you can you can flow origination.
We've been active in growing our close filling network that we added another flow seller in the fourth quarter.
We expect to add several more full sellers to our network in the first quarter of 2021 should increase our.
Quarterly fro volumes.
In our credit strategy, we were opportunistic in adding lower dollar price bonds.
Typically we added around 200 million.
Counting legacy Subcom Securities.
Average price 66.
Carries on attractive upside potential.
What we did.
Not sell any non agencies this quarter as time goes on we expect more of these legacy assets to reach their upside potential.
At which point, we'll sell them and recycle that capital into the best available opportunities.
Turning to slide 13 like to take a moment to highlight some additional information about our specified pool position.
It wasn't important contributor to our positive results in both the fourth quarter and 29 team.
I mean upper left Pie chart break out the specified stories that currently make up our portfolio.
As you can see across all coupons.
Exposure falls into three categories on balance LTV geography.
Okay mid geography bucket most of our holdings are in New York pools.
Reduced refinancing behavior because of course recording tax.
As a reminder, loan balance pools have lower refinancing behavior because of the fixed cost associated with.
The refinancing activity compared to smaller lot sizes.
And with higher LTV.
I have a harder time refinancing because the relative scarcity of refinancing opportunities.
We've also included a comparison of three miles prepayment speeds are specified pools to generic TPS collateral.
As you can see are specified pools are prepaying at rates much slower than the generic cohorts.
This differential.
With that causes market premiums for any securities.
Corporate payments are obviously could be attracted us any securities depends on the price paid for their slower speeds.
Perhaps on geography pools are generally in the same ballpark as certain loan pools.
Pools, typically trade at lower pay us.
Finally.
At the bottom of the slide you haven't who is a breakdown of our executive coupon positioning.
They are left most part of a chart shore holdings and cash securities and keeping pace.
Hi.
We have spoken in previous quarters about how our MSR position acts like a short positioning in the current coupon.
Increasing price for mortgage spread widening and.
Higher rates declining price for mortgage spread tightening at lower rates.
From a risk perspective, therefore, you're supposed to think about MSR position as an effective short position in the current coupon that as shown in the middle part of the bottom charge.
On this quarter, a mixture of scrap that 3% coupons.
Only.
Part of the chart shows that position that leads to effect.
As you can see although we have a significant long positions in or 3% coupon pools and TV series.
Our exposure largely offsets. This there's also a fairly uniform exposure across nickel parts that.
Please turn to slide 14 per discussion of our risk.
Wow.
Our exposure to changes in interest rates and mortgage spreads remain small.
The top right chart, you can see our low exposure to instantaneous changes in mortgage spreads.
As of December 31st a 25 basis points spread widening would negatively impact booked value by 2.7%.
Our MSR position was helpful and what you're seeing this exposure hedged agency RMBS would have a negative impact of 5.1%.
The MSR would have an offsetting positive impact of 2.4%.
The chart on the bottom of the page shows our book value exposure to instantaneous parallel changes in all interest rate.
Can.
The that as of December 31st.
Immediate parallel shift and interest rates upward of 50 basis points would negatively impact book value by only 2.4%.
These are very low numbers and we're quite comfortable with this profile.
Going into a little more detail you can see how MSR affects our hedging profile.
RMBS assets, we had a negative impact of 12.9% in such a rate.
And the MSR, what happened positive impact of 6.3%.
All the rest of our interest rate hedges, including option would have a positive impact of 4.2%.
To be clear presence of MSR portfolio beams that we have fewer.
Our financial hedges, such as swaps at options.
MSR holdings currently hedged approximately half of our interest rate risk in the portfolio half of our mortgage progress.
The extent that when you acquire more MSR these proportions will increase.
Lastly, I'd like to make some comments on the GRC.
Uh huh.
During the quarter, the rest treasury HFSA announced that the G.S. teams will be permitted to retain earnings.
This is a modification to the so called net worth suites.
Is that no dividends payable to treasury for Q3 Q4.
Hoping that the companies have begun to build network.
Under this new plan Fannie Mae won't be allowed to retain earnings up to 25 billion and Freddie Mac up to 20 billion.
With current profitability, we expect that that she sees will reach those targets in two to three years.
And just a few weeks ago.
The FCB announced that they were exploring revising the definition.
Qualified mortgage to remove the 43 P.T.I. limit.
Placing it with a more markets based threshold.
The CFPB director also suggested that she would extend the QM patch for a short period. While these details are worked out.
While the treasury enough that you have today are beginning to execute plan for that she.
We believe that any outcome will be highly dependent on the results of 2020 elections this year.
If the current administration remains it seems likely that some sort of plant will continue to move forward.
As we have commented in the past we believed that the effect on our business will be small unlikely focused on the potential for increase non plc.
In the future.
Turning to slide 15.
In summary, we're quite proud of our 2019 results I'd like.
Gross and total economic return.
You actions, we took in the third and fourth quarters Werent tenants are preserve our increased book value.
Or increased return expectancy answer workers risks.
Heading into 2000.
20, still short best investment opportunities to be comparing agency RMBS with MSR.
That strategy expect returns to be in the low to mid double digits.
Our credit strategy.
Prospective returns or the high single digits.
Possibility for greater total returns in the future.
Ill now turn the call back to the operator.
For Q1.
Thank you Mr. Greenberg, ladies and gentlemen, if you'd like to ask a question. Please signaled by pressing star one on your telephone keypad, if you're using speakerphone. Please make sure your mute function is turned on.
To reach or equipment.
Again.
Asking questions, we'll pause for just a moment.
Do you think.
First question comes from Bose George. Please go ahead, Sir your line is now.
Hey, good morning, it's it's Eric on for bottles.
They did walk through some of the book value decline since the agency spreads tighten in MSR.
They were slot.
Just any clarity on I'm actually what drove that drove the book value decline would be great. Thanks.
Hi, Eric This is bill.
First I'll remind you that.
So that's all in the portfolio is really meant to.
James volatile lease mortgage.
In both directions. So.
We want to spread widening.
Turning to them at all.
It is our performance.
The fourth quarter.
Correct.
Right.
A effect.
DCB.
Which are.
So there's no doubt.
Full year is that.
A little more usage as well.
Outperformed.
So.
Two very large degree.
The portfolio performance.
As always.
Hi, good constructions achieved by reducing volatility.
As I stated.
Good.
Little bit exposure lumpy coupon as you see chart on page.
30 like research over the short also.
Lower loan MBS outperform higher coupon MBS to that hurt us a little bit.
And you also mentioned.
That is liable portfolio, which we can you maybe two or performance.
I'd also say needs.
For the total looks on.
What percentage of slightly below one call.
The next one way to portfolio.
12% Blake.
Yes.
Asset.
Our portfolio with any one quarter like mine.
Constructing some of the long haul awful long long challenge shareholder value.
So you can see.
Results.
Yes.
Setting themselves.
Yeah.
So fourth quarter because.
Your next RFP sets the stage.
Ladies and multiple times for the long term.
Okay great.
Right.
Thanks for that it's going well.
Thank you also note.
Cost basis on your specified pools are the agency portfolio grows.
Just shy of one of four I'm just curious what the prices.
Right now and just any commentary on lightening up your footprint.
Specified pools the next.
Exchange religion, there for the TV agencies will be Greg just how do you think about that relative value. Thanks.
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She could you even 18 cents.
Sure.
In your press release.
You guys notices.
The average cost basis of this specified pools as one of four I'm just.
Curious, how your new acquisitions in specified pools competitors to that one of course.
And just your overall commentary.
Acquiring new specified pools in exchange for either Jeanette.
Yes, the portfolio specified pools.
Right I think.
Using indicating.
Absolutely I think when we look at me looking good spread.
Relative to TV aging leave them, they're talking about the Danish next steps.
The overall effectiveness.
Thanks Shane.
Right and certain.
Second.
The effective prepayment fees achieving that maybe.
During the chart on page.
Page 13.
He left.
Back in the right.
Some of the bulk catching embedded in them and me.
We.
I think they look at that multi day campaign and.
You can shift our focus between he Didnt expect will report to me.
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Also as you mentioned in the call in rotating our portfolio exposure down from hard slightly to three as we selling less selling days.
The backlog.
During the quarter and much of that still there has been located you too.
Interest.
Yeah, absolutely dalsa itself it matters here.
Please.
Yes.
Paul projection in the markets begin to protecting the box or.
Yep understood, but just like just to get a sense or what the dollar prices actually or.
Stuff.
Hi, good they they applied the mix and the portfolio right now.
Tony.
Hi, there.
Any reason were equal to one average pay us.
Depending on the story as you talk about.
No.
Thank you so.
Yes.
Yes exactly.
It's got to be watching.
Hello.
Yeah, so important to capitalize on page six yet right.
Yeah.
Sure no.
Totally understand I, just want to forget sense for.
The pricing in the market relatives or your cost, which is currently effects for the thanks for the call themselves.
Got it thanks for the question.
The next question from Mr., Doug Harter. Please go ahead your line is open.
And looking at slide eight can you talk about what were the factors that kind of driving the increased a portfolio yield as of December 31st compared to the funky leverage.
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Yeah, they didn't need if I'm looking at the annual I'd portfolio yield the the 374, so a group of December 31st compared to the realize yield of fruit systems or.
You know I guess, just what what's behind that back 20 basis point improvement and you know I guess how to think about that is kind of is is that 374 of the right number to kind of starting to think about what what the first quarter level can be.
Yeah.
Yeah.
Oh, okay.
[noise] Parade and then you know a couple of <unk>.
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Hello.
Yeah.
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Great and then.
Did you guys mentioned you know repo normalizing.
No in the for kind of.
<unk>, it's been a rolling over you just quantify what what that type of magnitude could be kind of as the full portfolio. You know every property prices fully to kind of where reporter levels are today.
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We're seeing on.
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25 to 30.
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Especially with level, but it'd be it'd be like at the end of 2080.
Got it but that makes sense I appreciate Rebecca recurrent.
[noise] next question come from Trevor Cranston.
Alright, thanks, and congratulations on a good 2019.
First question.
You know the faster realize pre pay speeds the last couple of quarters of obviously.
An impact on court T.S.
Can you get a sense of.
Where you're I'm expecting speeds to come in for the first quarter.
And also maybe talk about <unk>, you know how much impact the recent rally and rates is likely to have on speeds. You know given that we've already had lower rates and this and the relatively recent past. Thanks.
I think.
Oh.
No I I think we are still experiencing some amount of slow speeds from.
Yeah.
The year as well as well.
So I think that's what he's really a little bit slower than what we've seen but this meeting though that he had.
Ah well, we'll have the flat and.
I've seen in January so far English.
In this.
Push a lower rates was that spreads.
It really had taken into that <unk>, so primary mortgage rates.
Currently.
The same level or or you may need a little bit lower than what we saw in the fall and so after a temporary less but it is easy to the next month or two I think it seems to me to increase again.
Lady back to to the high that we saw or better about in the fall, let's say in that area.
I think with directly levels and.
Indexes bidding Oh, I don't know that bill feed that but it certainly easily be it was level.
Obviously, they seem to be on that if you could get into.
Spraying, it's almost easels were were speaker naturally faster.
And on on the level of <unk>.
Okay. That's helpful.
Then second question I'm, just wondering if you could provide any sort of commentary color on on kind of roughly how book values fared since the only the your you know given the movement Lucent roots and spreads.
Yeah sure. It was before I hailed domestic that much I wonder literary one place that while increasing <unk>, we'll have that four days.
You're talking about four it did not affect arbitrary expectancy in the workload in more detail flight to teach that those kind of scenes in the future and it highlight the differences that we're talking about a path between short term Kerry and long term economic return.
And that all that mess up.
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It's like volume Valley.
In that we saw mortgage debt modify the water.
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Okay perfect. Thank you.
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Yeah, I think for taking the questions. This morning.
I just wanted to take a look at slide.
<unk> and she wore positioning on P.D.A.
Excuse me.
Interesting to to read the Barbelled strategy.
Long on the three percentage <unk> fives in in the Middle you're sure I'm just curious what that's a G.S.T.U.S. is that just <unk> the longer position at the log into the curved or is there something else going on.
Thanks.
I wouldn't focus too, but on the T.V.A. part of the table I would focus on the the top favorites list shows than the exposure a Boston.
It's just really you know a mixture of.
<unk>, that's it like a little bit we spend a lot by looking at no it's true right.
Disables show.
Bye bye pools, which has called protection in.
In the security.
But of course, you said the old P.D.A.'s.
That even though these will likely be bad so there's no pay for them. So you could use a a good valuations and then return potential to those that lower floods and even though the speech will be back and so forth is anything five what we're we're showing the position of well 3.8.
It's not.
There aren't that many specified pools being produced a with those people the generator.
So they're hard to find that a lot.
The best we like we.
The evaluation.
Oh, the T.V. that even with the seems better <unk>. So that's what we're seeing there's just a it a mixture of of where the rocks like if I cooled and where the value is in the relative too much.
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I just wanted to equity instead of.
On July 23.
He added thing the new trying to think we add one on.
13 really.
Q that he did you the best sense of what are affected by this unions.
There are forced alignment adult servicing stores.
Picture really is meant to.
Lady over stores in their entirety.
God.
I would agree I think that's why they're they're really good and then I I, it's helped that it back to the previous comment though.
They will get swine 23 in particular, we look at the boards on on those.
R. and b. outside versus the T.V.A.T.V.A. position.
Should we think about this the <unk>.
<unk>, 40% of the premium Inglewood walk.
In the fourth and so where are you trying to sort of net that missed out to the short P.D.A. Division.
Yeah.
<unk> and the T.V. addition, sometimes maybe created by just tactical decisions that were making it <unk>. If you go Kate portfolio out of one coupon or or into another.
Snapshot in time it has to be that we had a short tedious position but.
The the net for position is what were they think here so in terms of the risk that okay.
God, Okay, great. Thank you so much guys.
<unk> worked for a question.
Expressing concern Mr correctly.
Alright, Thanks for taking my question just just one on in terms of the economic leverage you touched upon it and prepared remarks that you don't expect leverage to to change too much time current levels. Just wondering what the key drivers were for for the fight about pick EM in the corridor <unk>, whether it's mainly due to.
<unk>, a little more toward the agencies or whether there's anything else <unk>. Thanks.
Oh.
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So the average for that the corner of.
Oh and at that that could be an economic that's actually I would say it's like okay.
It's like maybe for you to <unk> right.
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I've been looking at is is is well he added.
Threat, but more importantly than that.
Coverage is is but one measure of listen to you but that.
You talk about it last before that.
<unk> so that's all.
It's a lake bus from.
Variation in motor spread and so lots of times when when people talk about leveraging that really asking a question about how much money you can lose or what is your book about that.
Well, you go to be or questions of that nature and so like.
Then again, but that was on a couple of minutes or reduce that and so <unk> what has to be respectful low phenomenal quote what leverage Oh, we actually look at.
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In general and and the like.
Money and for opera clue, I forget that no more than what we stayed at 911.
Okay, Okay very helpful.
And just one one follow up on on an earlier question just in terms of the the market trends in hedging do given that a lot of the trends reverts amendment fourth quarter versus the the rest of the year and 2019.
And given your early remarks that you know when you look and hedging support for the longer term should we assume that there weren't too many changes to the head, Jimmy and and a quarter and bad in terms of the macro assumption, you're you're pretty much embedding the summertime based on for the first three quarters of Tonight.
The continue going forward backs.
Okay.
I would find it here and just like 14 that shows or risk pool files from a effect perspective and from an interest rate perspective, and if you look back at previous porters I think you'd see.
Similar exposures and they're reasonably small so the the short answer to your questionnaire that I don't think he really changed are taking anguish profile dramatically in the recent course.
Okay very helpful. Thank you very much.
[laughter].
Right.
My next question go through Matthew Happiness.
You guys think you're kicking my question.
You know there's been a request for comment out on pooling arrangements with the the disease, you know, but particularly particularly impacting the T.B.A. specified pull market you guys had a strong history of of of planning value relative value between how how could that impact.
The poor noises do change the price difference between T.V.'s and that's my pool.
Yeah, very tiny question and obviously, we're we're paying attention to those those kind of little proposal. They all proposals at this 0.2 I think.
A lot of movies is as you know somebody should be much expensive have express opinions that.
Proposals.
Likely impacts stuff like little buyers and and and originators age really almost everyone in the in the chain I I prefer to see how that take out a little bit more before before figuring out what the impact will be a moderately we are placed papers in that space not parts maker. So.
Will react to do whatever it is and will find value where we can you talk.
[noise] isn't an opportunity.
Is it got a limit.
You know where I'm hearing <unk> people say this could improve the G.P. beard markets go to limit them high speed servers yours, but it could diminish the quality of specified pool I mean, given you guys Oh and then the charging ahead with P.D.A.'s and you buy specify booming Susan opportunities is going to create.
More price discrepancy.
Does it.
<unk>, you know arbitrage opportunities or portfolio management opportunities.
[noise] idiotic.
Wow.
Reference is that the more different flavors of stuff with my school. There are the better it is for us were able to just pick our stuff more and right.
The value in ways that you may have different opinions than the prices that might be in the market. So.
To my mind anything that that Homogenise is that is not profitable but.
That's what they want to do anything but it is yeah. There are like you said, it'll make T.V., a little bit better and.
It might get through convexity in certain ways and so forth. So it's not clearly are one way I'd say in terms of you know.
Yeah.
But then like ours would be to maintain it the way to.
Got it okay.
Moving on the Cherishing side, we added I think you said one one slow salary yeah I'd love to hear you know in terms of that bank or Nonbanking, you know, what's the outlook I mean, what you're seeing in terms of adding bank or non big salaries and then.
Yeah, there was talk of it some of the chip Maureen getting back in the F.A.J. mean, <unk> or they're going to be do do you foresee.
Changing the bank appetite to grow servicing pictures of all the comments on the outlook on the on the servicing landscape.
<unk>. So so the flow says we get adding are all non backed or a small mortgage originators that got it obviously.
Are interested in in Florida is because they don't have either the capital or or any internal capacity in other ways to educate or servicing.
Which requires lots of infrastructure and expertise and so forth.
And they had to focus on just search anymore.
So we have a bunch more in the pipeline as well for the for the for sports ones wait until so we're pretty optimistic about the water close volume.
The higher in the future.
Service to market the fourth quarter. It was pretty <unk> I would say you also about 25 billion both packages come to market intellectual go ahead.
It's pretty low and and he didn't have that a fair amount of that not trade.
Again, it's worth at least over the past.
<unk>.
Volatility interest rates lots of more services sellers.
Refer to have a stable race you know someone makes a decision to sell the services portfolio on Monday, and it's not over the next week, following monday or or or Wednesday, or you later that the that people will go up there and in that time educated with with interest rates.
Rates involved 25, or 30 or 40 basis points in Austin the prices aren't expected anymore. So that's what we really need.
Oh about.
Some race stability.
See more more booksellers come up in the box.
Got it okay. Thanks, guys.
No further questions on that turned to call back in his car for computing comments.
[noise]. Thank you I think he might try and have a conference call today.
Okay.
<unk> why am I happy very funny.
How can he can't make an echo effect me 20 PM Eastern time will be flat tax on our website.
[noise] hadn't he can't rank like making like either.
Oh wonderful.
You can check.
Thank you for your for these patients you may not just kinda.